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ABN Amro Increases Equity Allocation, Cuts Cash Holdings

ABN Amro Bank NV’s wealth-management unit is increasing its allocation for stocks and cleaning out cash holdings as it bets on a rally in European and emerging-market equities next year.

Investors should turn to equities in the new year to benefit from a rebound in the global economy, said Didier Duret, who helps manage 146 billion euros ($189 billion) as chief investment officer at ABN Amro Private Banking in Geneva. The wealth manager has increased the stocks portion of its portfolio to 40 percent from 36 percent, he said.

“Equities are entering a sweet spot, with better macro data and a turning point in the manufacturing cycle,” Duret said in a telephone interview. “You can get a better return with dividends of quality companies than high-yield bonds, which are rather expensive.”

European stocks will continue to rally, after the Stoxx Europe 600 Index has gained 14 percent so far this year, as the prospects for export growth increase, Duret said. Company earnings will grow between 8 percent and 10 percent next year, he said.

ABN had raised its position on the region’s equities to overweight, meaning it held more of the stocks than are represented in global benchmarks, after the European Central Bank agreed on an unlimited bond-purchase program on Sept. 6.

“The European economy may lag but the equity market may move ahead,” Duret said in a phone interview. “Europe’s export sector will benefit from a return to the global growth pattern. There is also a chance of a positive earnings surprise.”

Emerging Markets

ABN Amro Private Banking is increasing exposure to emerging markets in Asia, particularly China, Indonesia and Thailand, he said. The unit is betting on a rise in stocks as China’s economy recovers and U.S. politicians address the so-called fiscal cliff of more than $600 billion of automatic tax increases and spending cuts scheduled to come into effect next year.

The biggest risk to a stock-market rally in 2013 would be a lack of support by central banks, whose actions boosted markets this year, Duret said.

The wealth manager also holds 45 percent of its portfolio in bonds, 8 percent in hedge funds, 5 percent in real estate and 2 percent in commodities. It maintains an underweight rating on U.S. and Japanese equities.

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